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The money being poured in the power and transport infrastructure under the multi-billion-dollar China Pakistan Economic Corridor (CPEC) initiative will improve Pakistan’s competitiveness internationally and link it with more countries than it is doing business with at present. That will create a huge space for foreign direct investment in the country’s export industries.

“To encourage exports you have to be competitive internationally. Many factors play a role. The government is working a lot on that. (Energy and transport projects under) CPEC will make Pakistan’s exports more competitive.

“Investments in special economic zones, railway, roads and ports will significantly cut export costs,” Mr Bruno Olierhoek, the president of the Overseas Investors Chamber of Commerce and Industry (OICCI) that represents nearly 200 foreign companies operating in Pakistan, noted in an interview with Dawn.

He was asked to comment on why foreign investors operating in Pakistan were focused on the domestic market alone and reluctant to invest in export industries.

“CPEC is a loan and Pakistan is using it for infrastructure and its energy issues. This is something that is (also) misunderstood abroad, that China is somehow giving money to Pakistan. It isn’t the case”, says Bruno Olierhoek

“Availability of energy and infrastructure upgrade will make it viable for others (foreign investors) to invest in new export opportunities. It will help create more export-oriented companies — also (to export goods) to china.

“Empty containers returning to China don’t make sense. The whole objective of CPEC is to not just create a road from China, but to improve competitiveness of the country and connect it with more countries than it is doing business with today. It is because of this possibility that CPEC is a game changer.”

But Mr Olierhoek cautioned that availability of energy and infrastructure upgrade wouldn’t automatically attract foreign private investment. “CPEC is good news (for Pakistan) but the government should also work hard on dismantling other barriers keeping foreign investors at bay.

“For example, perception on Pakistan tends to be more negative than the reality on ground. People overseas are still scared because of the perceived law and order situation although it is a different story once they are in the country.”

He conceded that foreign investors in the past have remained more market-centric because of energy and infrastructure bottlenecks and a “young, dynamic and big domestic. So domestic market has a lot of opportunities and a lot of investment is going there.”

He didn’t agree that foreign investors were waiting for China to take care of Pakistan’s energy and infrastructure shortages before they invested in the export industries.

“CPEC creates opportunity for everyone and it is a misperception that it is only for China. But still it is early days. Investment (in power and transport schemes) is done mostly by Chinese companies but like I said when you have infrastructure in place it opens opportunities for other investors as well.”

CPEC is not a giveaway from China, Mr Olierhoek said. “It is a loan to Pakistan and Pakistan is using it to increase its infrastructure and address its energy issues. This is something that is (also) misunderstood abroad that China is somehow giving money to Pakistan. It isn’t the case.

“Of course Chinese are negotiating good deals for their companies. So Pakistan should make sure these investments are used in its best interest.”

Foreign direct investment: Mr Olierhoek sought to dispel the impression that foreign firms operating in Pakistan aren’t investing in new Greenfield projects and pointed out that OICCI members had reinvested $2.2 billion from their profits in 2016, which was roughly the same as $2.6bn received by the country as FDI (including Chinese investment on CPEC related projects).

“The foreign companies already operating in Pakistan have positive sentiment and are investing here for the future. The size of reinvestment shows that we believe in Pakistan.

“Of course part of our reinvestment is for maintenance and small upgrades. But some of the money has also gone into new projects. OICCI member firms represent 14 different businesses sectors and they have invested in new projects across those sectors of the economy.”

He said foreign direct investment flowing into Pakistan was less 1pc of its GDP, lower than other regional countries like India and Bangladesh and required to be raised to at least 3pc of GDP.

“New investors look at (the) existing investors to see if they are reinvesting. This is something the government should use to attract foreign investment. The OICCI wants to speak on behalf of the country (to attract new companies). We have no agenda. We are objective.

“Investors always have a choice of investing in Pakistan, in neighbouring countries and elsewhere in the world. Reinvestments are a very strong signal of our belief in Pakistan.”

He urged the government to abolish the super tax that was levied for one year but now has been extended into its third year, pay tax refunds, solve post-devolution interprovincial issues, reduce corporate tax, facilitate legitimate repatriation of dividends (to foreign shareholders of companies).

“These are a few easy things that can be done. Businesses like consistency, predictability and transparency. The government can form a kind of federal council to work with the investors to improve ease of doing business ranking, and remove the impediments like multiplicity of (provincial and federal) regulations, higher tax burden on documented sectors, and so on, and attract new foreign investment.”

Uncertain 2018: With elections approaching, Mr Olierhoek feared uncertainties to increase over the next several months. “…before the next elections the government will be focusing on voters in this transition period as opposed to decisions that have long-term impact (on the economy). That leads to a bit of uncertainty. But of course business goes on as usual.

“Overseas investors look at long-term perspective on the economy… and the long-term perspective is that Pakistan still has enormous potential in different business sectors. That explains why OICCI members are consistently more bullish than overall and 87pc of them say they would continue with their investment plans for 2018.”

On DawnNews

Comments (84) Closed

Some sensible advice. We need to gear up to take full advantage of the CPEC.

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Sachin

Mar 19, 2018 08:46am

It is not easy to grow high value exports in face of China's own exports which are much cheaper.

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Iqbal Janjua

Mar 19, 2018 08:52am

The main question is what Pakistan can export in competition with China, Vietnam, indonesia, Thailand, Philippines, Myanmar, Bangladesh and India? If you have answer for this then next step is to look for market.

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Rasheed Khan

Mar 19, 2018 09:06am

The bad wishers of Pakistan the propaganda machines

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My Advice

Mar 19, 2018 09:09am

CPEC infrastructure with road and port system is a positive development. But to fully benefit from it, Pakistan need an industrial base, where goods can be manufactured locally and exported internationally. Otherwise, it would be simply a pathways for other countries to transit their merchandise using CPEC system.

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RK Singh

Mar 19, 2018 09:16am

Its China, not Soviet Union, which used to give free dole to many countries. China will arm twist Pakistan and get Gwadar.

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Zak

Mar 19, 2018 09:28am

These are loans today. But over a period of time they will be converted to grants. That is friendship.

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Sadiq

Mar 19, 2018 09:40am

Majority of Machinery used in Power projects are obsolete from China, Still need to pay full amount with commercial interest

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CHISTI

Mar 19, 2018 09:51am

But average pakistani consider it aid and investment

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Raj

Mar 19, 2018 09:55am

It is a common sense that, such a huge amount cannot be a gift or giveaway. It is a loan only but no one was willing to give such a big loan. But China is doing that. Whether it is for their own interest or something else, the money is coming to Pakistan and kind of money is definitely required by pakistan and it should actually thank profusely to China for this loan. Now the tough part is that, how to keep pakistani industries and comepetitiveness to the best and this should be addressed. Consider the present case wehre Chinese are highly subsidising their industries in order to give a competitive price which cannot be matched by any country. So, no competition for chinese goods across the world. In such circumstance, how is pakistan going to maintain its competetitveness is to be seen. If pakistan cannot use it properly the same loan will strangulate pakistan and its economy. Take care.

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Prabhul

Mar 19, 2018 09:56am

@Zak There are no brothers or sisters in business of interest. Dont blindly assume anything.

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Zen

Mar 19, 2018 10:03am

Shocking news! These are loans and not free money.

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Dr kashmiri

Mar 19, 2018 10:16am

@RK Singh blah blah blah.

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Arfeen Khan

Mar 19, 2018 10:40am

I am glad that author points accurately that it is loan but investments or aid.

Really wish someone translate this to Urdu so average citizens can understand the ground realities. Sharif government has been dodging this question at all forums.

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MSUH

Mar 19, 2018 10:47am

Loans are fine as long as they are used for infrastructure development, it will boost economy in long run. Pakistan Debt to gdp ratio is well in limits.

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bimal william

Mar 19, 2018 11:16am

The million dollars question is can Pakistan pay back these loans plus loan received by IMF and other international donors with interest? As per the agreement ,Pakistan share from total profit is just 9%,which I think is going to be adjusted against interest rate.

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Najum

Mar 19, 2018 11:30am

The interest rates are also double digit; mutiple times higher than IMF and World Bank loans.

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Foreman

Mar 19, 2018 11:43am

@RK Singh .......Why are you getting upset? Pak China friendship dealings are thoroughly tried and tested for more than 6 decades of all sorts of changing weathers. Only good friends attract good friends and not otherwise.

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Bloo

Mar 19, 2018 11:44am

A good piece and some sensible stuff in there

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Sami

Mar 19, 2018 11:53am

Today it is a loan, but when Pakistan cannot repay (like in Sri Lanka), the Chinese flag will be hoisted at Gwadar and other places. Pakistan knows this risk

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Dev

Mar 19, 2018 12:09pm

CPEC is a loan for which Pakistani government has guaranteed high returns to China. So, what is the problem here? The problem is, Pakistan is using the money to build power plants which would generate electricity at a very high cost to the end users. Any manufacturing which Pakistan does with that electricity would produce costlier products in comparison to its competitors. End result, Pakistan would not be able to increase its export thereby making it impossible to pay the Chinese loans.

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Aslam Qadri

Mar 19, 2018 12:10pm

Ask an average Joe, how it feels to take a loan on housing and pay it every month out of salary. Loans can be a boon and can very well be the end of most things.

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Naeem

Mar 19, 2018 12:50pm

Well end of the day it is beneficial for Pakistan economy even they Pakistan doesn't export.
We support CPEC.

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IAB

Mar 19, 2018 01:09pm

like all other loans, this will also go into pockets of our corrupt government and officials...

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R Sultan

Mar 19, 2018 01:29pm

Are we able to service the interest on these big loans?

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A shah

Mar 19, 2018 01:32pm

Time for Pakistan to wake up and smell the flowers.

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A shah

Mar 19, 2018 01:33pm

When Chinese come to collect debt, there will be no sweeter then honey or higher then mountains - it’s about hard cash. The sooner Pakistan realises the better

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vats

Mar 19, 2018 02:19pm

in the fear of facing competition with cheap production MFN status was not given to india by pak, wonder how they will face the dumping of super cheap goods form china

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JUGAL KISHORE SHARMA

Mar 19, 2018 02:23pm

Sino,Pak,India trio should expertize hands to success and within 5year cost recoup from project, because time being maintenance,Interest, limitation of Pak and Sino transaction never recovery of Cost, But India nepal and Bangladesh if add this project there vast potential, feasible,fruitfully, and mass fostering of job,medical and hunger

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mansoor

Mar 19, 2018 02:24pm

@Zak Wishful thinking.

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mansoor

Mar 19, 2018 02:28pm

@R Sultan noooooooooooooooooooooooooo

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Mike

Mar 19, 2018 02:50pm

@Zak I like your positive attitude. But which self respecting nation would like to get some money thrown at it for nothing. Please have some self respect or else nobody will respect you

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Mike

Mar 19, 2018 02:54pm

@Aslam Qadri Right on dot Aslam. To service the loan, you need to have higher earnings. That will not come from export since you will not be able to subsidise the exports and thus will remain uncompetitive. The author is only partially correct. What about the local talent. Do you have enough to make world class products and export.
Stick to your strengths please

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Sam

Mar 19, 2018 03:22pm

@My Advice: absolutely right. Pakistan would have taken loans to create an infrastructure where other countries benefit. And Pakistan ends up repaying the loan.

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sini

Mar 19, 2018 03:57pm

@Trump Et Yes Pakistan should set up toll gate collection centers for every 100 kms so that good revenue is generated. Opening Dhabas to provide Parathas near all toll gates will give additional income and generate new jobs. It is a great opportunity for Pakistani youngsters .

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Marcus

Mar 19, 2018 04:04pm

Pakistan shud stick to its strengths agricultural (food will be in short supply) water (need to resolve saichen) energy (more nuclear plants) sports and educated labour.

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Feroz

Mar 19, 2018 04:38pm

Putting in place the infrastructure is great but at what cost ??? After payment of interest on these loans, someone has to pay high tolls to use the Expressways, high tariffs for electricity usage from the new Power plants --- will goods produced be competitive in global markets ? Also Chinese companies have been given all kind of Tax concession, how can Pakistani or other foreign companies compete without a level playing field.

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neal kluge

Mar 19, 2018 04:50pm

@Rasheed Khan That is the truth.

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Skeptic

Mar 19, 2018 04:54pm

Finally, someone is speaking the truth about the myth and hype surrounding CPEC. Some Pakistanis believe China is doing them a favor, by being so generous to give away $46 billion. This 'Loan' will have to be paid by next three generations of Pakistanis, by tightening their belts and suffering higher taxes and inflation.

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Tapan

Mar 19, 2018 05:04pm

@Iqbal Janjua
This gentleman is right. What Pakistan will export. they need to explore markets for the same. Coz after you make infrastructure if the Port or other things want work then it will be huge liability for the country.

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Mohajir

Mar 19, 2018 05:24pm

Forget export, CPEC will boost our imports from China and every other Central asian countries.

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MONIER

Mar 19, 2018 06:07pm

Reality check this loan still better than giveaways that disappear as soon as they are received without any accountability. At least there will be some accountability in the process with a system of balance and checks to avoid corruption.

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Reader

Mar 19, 2018 08:39pm

C.P.E.C. should be transparent. It is incumbent that the government make public all documents related to this project. This is about two nations, not individuals, therefore both the nations should know, be aware of all what this project is about, financially, legally, politically, security wise, culturally, and all matters about it. This is the test of our friendship, i.e. keeping it secret means there is something to hide, something others must not know, should never be the thinking.

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Reader

Mar 19, 2018 08:43pm

@Raj . Not so simple, when a country reaches a certain level of prosperity, it is difficult to keep on subsidizing its industry, not for ever. China cannot control everything all the time, Just like any other powerful country.

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Ash2000

Mar 19, 2018 08:48pm

Headline says it all. Now, make public also what is the interest percentage on different loans.

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Iqbal

Mar 19, 2018 09:19pm

@Zak
No grants with the Chinese. The billion dollar Chinese businesses only do cash business with smaller entities in USA and you expect grants from them in Pakistan? Most of us will hit the Pakistan's non-competitiveness realization soon with no day dreaming.

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Dr. Malaria, Garib phaltoo

Mar 19, 2018 09:19pm

How many years will it take to repay loan at what rate of interest?

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Zak

Mar 19, 2018 09:41pm

Let a clean sincere non corrupt government come in after elections and see all the right things been done to put Pakistan as an economic power of the region. We have the talent and the resources but not leadership as of now.

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Masood

Mar 19, 2018 09:42pm

In Pakistan, a Pakistani would not give "free money" to their relative, next door neighbor or a stranger. Why do you suppose that A commercial country like China would give free anything to Pakistan ? They might cooperate in a business deal, give Pakistan a loan on 9% instead of 12 %. Now the smart way for Pakistan is to pay back that loan by dedicating the tax and tariff earned by this highway exclusively for that purpose. Otherwise the $90 billion overhead will turn into $168 billion with interest.

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M.Saeed

Mar 19, 2018 10:48pm

Must be a "Pay as you earn" type of arrangement.

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Sachin

Mar 19, 2018 11:31pm

CPEC is a good thing. But it is not enough by itself. You will have to make free trade and travel policies and no matter how much you want to avoid, India as a huge market and a huge economy and a huge producer , without India, the CPEC will be grossly underutilized and underperform. When you open a shop, you have to welcome every customer who pays. You cannot turn away any customer because of any reasons.

He has pointed out true color of CPEC but is hiding the fact that it is built by, for and of China.

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sajes syed

Mar 19, 2018 11:34pm

@Sachin , Very sensible and to the point comment.
China will not allow local industry to grow.
It will be ONE WAY traffic, all the way.

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Devinder Chohan

Mar 19, 2018 11:34pm

“It is a loan to Pakistan and Pakistan is using it to increase its infrastructure and address its energy issues. This is something that is (also) misunderstood abroad that China is somehow giving money to Pakistan. It isn’t the case
Of course,your Chinese friends will give contracts(as you already noticed) to their own companies and bring in their own labour to make Pakistan prosperous and competitive.A win Win for Chinese.
.

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Zak

Mar 20, 2018 12:46am

Stay the course with us, for the best is yet to come.

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Amir

Mar 20, 2018 12:47am

Good take some more loans n let them take over this country

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MP Singh

Mar 20, 2018 02:53am

CPEC is a loan at high interest rates!

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Moth

Mar 20, 2018 03:15am

CPEC is a loan. That loan is from one country to another country. That loan has to be returned. What does that mean. Only one thing that Pakistan growth should be possirive and has to be over 5% for atleast 10 years. Buckle up. Not an easy path.

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YS-USA

Mar 20, 2018 03:54am

@Zak has a point. If you do not repay, what can China do?

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Iffe

Mar 20, 2018 06:03am

Good article... time to Step up Pakistan...
One point I would like to raise is that allot of readers are commenting on developing industry and exporting. Very Well, Yes way to go! But you are missing a very big market... which is Pakistan itself (a 200m+ and grown consumer market). We still have a large import volume with potential of localizing. Hit this golden goose and you will prosper.

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Crazyworld

Mar 20, 2018 07:33am

And a very expensive loan at that

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Zak

Mar 20, 2018 09:48am

@YS-USA : Exactly!

What was done to the port in Sri Lanka can't be done here ... ever ... for obvious reasons.

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Bhaskar

Mar 20, 2018 10:20am

Just what happens if pakistan becomes defaulter. Same like srilanka they will hand over gwadar to china and china uses it for its military purpose. Any way port is useless for pakistan (if its not modernized) and with china flags over gwadar port, India will think twice to attack in case of war. Its a win win situation for pakistan. They are getting security from china in return of huge debt.

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Suraj

Mar 20, 2018 10:50am

Well said being competitive at international level increases export. But that is not the first requirement. Firstly try to utilise those markets where you are already competitive. For example in Iran, India , Afghanistan, Nepal, Bangladesh etc. Not in America Russia Europe and China where you need huge improvements which take lots of thing with time. Built economic relations with these countries keeping aside political issues.

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Suraj

Mar 20, 2018 11:00am

@Foreman Looking for freinds in bussiness is going to upset you or even worse.

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Devopam Mittra

Mar 20, 2018 11:26am

A costly loan ( in terms of higher lending rates than market) , for an infrastructure mainly meant for international transport without an agreed toll fee , serving for a hidden purpose of goods dumping by the manufacturing giant neighbor country - all at the cost of tax payer money ?

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sanjeev

Mar 20, 2018 11:55am

Don't pay.They can't take the road back to China.They will have to reorganise the loan.

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H Manshe

Mar 20, 2018 12:20pm

@Reader ... China is a dictatorship it can do what it likes. Temember very unlike free market economy where all compete on a level playing field. Pakistan should have looked harder at other nations where China has invested and things have not worked out for host nation. Still to much secrecy Surrounds the cpec agreement for anyone to comment accurately. For example some estimate that roughly 70% of the loan will be paid put to chinese companies providing labour material and machinery to construct cpec that alone is mind boggling. Anyhow lets be positive and watch what unfolds.

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Fuzail Z. Ahmad

Mar 20, 2018 12:22pm

"This is something that is (also) misunderstood abroad that China is somehow giving money to Pakistan". This is foolish to assume that. There is no free lunch and in this case Pakistan is happy to pay the cost from the immense benefit it expects from CPEC.

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R Sultan

Mar 20, 2018 12:54pm

@Zak You appear to fool yourself. Loans are loans from China. The debt will need servicing over the tenure of the loan by generations to come. If the debt is not services there will be penalties just like what happened to the unserviceable loan made to Sri Lanka - China took over the Hambantota Port instead for 99 years!

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R Sultan

Mar 20, 2018 12:55pm

@mansoor Then we are in trouble, surely? What are the penalty clauses?

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Reality

Mar 20, 2018 03:28pm

guys CPEC is failure for Pakistan. Those who thinks it will boost economy in long run are dreams.
Profit sharing of gwadar port is 91:9 9% is pakistan profit.

Your politicians are polluting your country.
If you want to know the reality just check trading between india and pakistan. India earns 2 billion dollers profit only from pakistan. where pakistan not trading 40% of it. what kind of trading your country is doing. Pakistan importing milk powder from india why? there is not shortage of milk in pakistan then why trade milk?
you need to asked questions to ur PM

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Chikna_Javed

Mar 20, 2018 04:11pm

@Zak our mindsets are made like this. No need to bash this mans thoughts.

Pakistan must utilize the infrastructure at its fullest to gain advantage. Otherwise, it may backfired.

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Vaibhav

Mar 20, 2018 04:29pm

China is giving loan to Pak. Pak is building infrastructure that will be used by China for it's exports. Pak manufacturers are not competitive enough to export. Hence, it's simple China is letting Pak pay for boosting exports for China. With time, these loans are gonna get piled up on Pak and only way to repay will be to lease or handover Pak land to China. Srilanka is an example.
All the best Pak!

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Shakil

Mar 20, 2018 06:24pm

looks like Indians are more worried about Pakistan than Pakistanis!

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Manji

Mar 20, 2018 07:13pm

@Zak Hahaha... That is wishful thinking, not going to be real

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Iqbal F quadir

Mar 20, 2018 09:17pm

There are two important implications in Mr Olierhoek's highly beneficial comments.

The Pakistani loan takers are upping the cost of the loan in league with the Chinese companies for reasons unknown.

The announced infra-structure projects are designed for and economic only for an export market that has not even been conceived..

Bravo to our planners and the elected government.

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Santosh Bhardwaj

Mar 20, 2018 09:51pm

@Zak just like China did with Sri Lanka

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Nilesh

Mar 21, 2018 12:21am

Increase competitiveness investment is required in skill development. Cut budget on army and religious institutions and invest in schools.

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LAHORI KID

Mar 21, 2018 07:21am

That is why it is so important to involve business minds in our management that are dealing with these huge projects. The politician doesn't know a single thing about business, the business people will help Pakistan make better decisions, make better deals, make better choices. You don't let a plumber fix your electricity issues, why allow politicians to make business decisions.

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BAXAR

Mar 21, 2018 01:27pm

@Iqbal Janjua "The main question is what Pakistan can export in competition with China, Vietnam, indonesia, Thailand, Philippines, Myanmar, Bangladesh and India? " Pakistan is not competing with these countries, these countries are competing with China. China wants Pakistan to help it compete with all. Pakistan is positioning itself accordingly. What Pakistan can produce and export to anyone, is another question.